All Forum Posts by: Brent Seehusen

You can find SFR's in LA, Riverside, and San Bernardino counties that cash flow, but nothing in Orange Country right now. It's still possible to find a handful of condos that cash flow in OC but they are in complexes with lots of deferred maintenance and at high risk of special assessments IMO. The SFR's that cash flow in LA county will be in C-areas so you won't find them in neighborhoods that are less than 20 years old with good school districts. Long Beach has a lot of condos available that will cash flow but it's a big city with many different areas, so you'd need to see what the trade offs are for any particular condo (crime, deferred maintenance, high HOA's, etc).

The only area of Orange County with SFR's less than 20 years old and good schools that I can think of is Irvine, where Chinese buyers are paying $800,000-$1 million for a 1% cap rate and huge negative cash flow. Even at the bottom of the market you couldn't find cash flow in Irvine because prices just didn't crash as hard as the rest of OC.

So I think your criteria is a little too strict.  Try looking outside of OC and loosening up your criteria from A+ areas.  I've been having success finding properties in San Bernardino county in B-areas that have no problems cash flowing.  Notice I said B-areas which indicates blue collar, low crime.  I would still avoid the high crime areas of SB county.

There are plenty of properties that meet the 1% rule in LA, as well as the other surrounding counties.  You just need to put in the effort to find them.  Near the bottom of the housing market you could find these properties in pretty good areas, now they might be located in less desirable areas.  If it feels like 1% will disappear forever, it's only because we have experienced a rapid increase in prices.  Believe me, LA investors in 2004-2006 were thinking 1% was gone forever also.  Yet values came back down to earth.  The housing market will tank again probably sooner than most people think, and there will be an abundance of great deals again in the not-too-distant future.  The LA housing market has had a down market on average every 11 years since WW2 and that's not likely to change.

 You can easily meet or exceed 1% in many parts of California.  I've seen properties in LA, Long Beach, Riverside County, and San Bernardino County.  I've also seen properties in markets of San Diego County such as Oceanside.  In my home area of Orange County it's pretty rare though.  Flipping is more popular than buy & hold around here.

Recently, I closed on a duplex located in San Bernardino County that I estimated very conservatively to be 1.5%.  With the right marketing, looks like I'll be able to achieve 2% rents (one unit is currently vacant).  Obviously, there are some trade offs with a higher rent ratio.  You need to carefully evaluate the risks and decide if it makes sense.